Tel Avia lower for third day amid election uncertainty

RobertDaniel

TEL AVIV (MarketWatch) -- The weakness in Israeli stocks carried into a third straight session Thursday, as the question of which of Israel's two major candidates to be the next prime minister would be designated to form a government remained open.

Nice Systems
NICE, +0.06%
made a strong showing, mitigating losses in Tel Aviv's blue chips and helping keep the Tel-Tech 15 Index of top technology issues in the green.

The situation seems "as if [the Likud's Benjamin] Netanyahu holds the upper hand" over the centrist Kadima Party's Tsipi Livni, "as the majority of seats [went] to the right-wing parties," Leader Capital Markets said in a note.

But it's unclear whether Avigdor Lieberman, head of the right-wing nationalist Israel Is Our Home Party, won't support Livni, the brokerage said. "[Although] his security views are closer to those of Netanyahu, his civil agenda is closer to that of Livni.

"The bottom line: TV talk shows and the press are enjoying the political circus and speculation," but "uncertainty is not good for the market."

Investors "will have a clearer picture of who will be the next prime minister by early next week," Leader told clients.

Late in the trading day, the Tel Aviv Stock Exchange's benchmark TA-25 Index fell 0.6% to 685.94, while the TA-100 Index (1884407) lost 0.4% to 624.80.

The Tel-Tech 15 Index issues rose 1.8% to 149.52.

The most-active issue was Isramco
ISRL, +2.09%
the oil company whose shares traded down 8.2%. The stock has been trading actively for some weeks since a group to which it belongs announced a substantial natural-gas find off the coast of northern Israel.

Nice Systems, the producer of digital recording and archiving systems for government and corporate applications, saw its shares run up 10%. The stock had jumped 12% on Wall Street in Wednesday's trading, as the company reported fourth-quarter earnings that more than doubled on 14% higher revenue and said it's got a strong backlog amid good demand for its solutions.

Also active among the blue chips was fertilizer producer Israel Chemicals, down 3.1%, as well as parent holding company Israel Corp., down 5.2%.

The downgrade reflects increased business risk after the rating on its Israel Oil Refineries subsidiary was cut plus increased risk at the Zim shipping affiliate, S&P Ma'alot said in a statement.

And "despite our expectation of weaker results at Israel Chemicals compared with 2008, following a trend of lower prices and demand for potash and phosphates together with lower demand for bromine products ... the long-term trends in potash will remain positive and the Israel Chemicals results will still be good," the firm said.

The Israeli business daily Globes reported that Retalix cut 17 staffers in February after shedding 20 in both January and December. In all of 2008, Globes reported, Retalix cut 200, or 13% of its jobs, through cuts and attrition.

Rate moves in focus

On the macroeconomic front, UBS analysts predicted in a report that the Bank of Israel would cut its benchmark interest rate in half, to 0.5%, for March and would make its first rate increase in 2009 in the fourth quarter.

The central bank had cut its benchmark rate by 0.75 percentage point, to 1%, on Jan. 26 for February.

That move reflected the bank's expectation that 2009 gross domestic product in Israel would contract 0.2%, compared with its previous forecast of growth of 1%, UBS analyst Reinhard Cluse said in the report.

"The bank left the door open for further rate cuts. Gov. [Stanley] Fisher even indicated that if rates were to drop toward zero, the bank might resort to unconventional monetary-policy tools, such as quantitative easing, the purchase of bonds or intervention in the credit markets," Cluse said in the report.

Halving the benchmark rate to 0.5% should end the Bank of Israel's easing cycle, leaving the rate only marginally above the U.S. federal-funds rate, Cluse said.

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.